Investments In Food And Agriculture Sector Hits A 5-year Low In 2016

Adding to the worries of food companies, Private investments in the Indian food and agriculture space have hit a five year low this year in terms of value, according to a study released, owing to plunge in deals in the food tech and online groceries space.

The year 2016 registered 62 deals in this sector, the lowest in terms of deal value over the last 5 years, compared to 2015 which witnessed 153 deals. Total investment in food and agriculture sector has been $250 million, a 78 per cent dip from 2015, according to VC Edge Indian Food and Agriculture Funding Insights, a study by News Corp. VCCEdge.

Food tech and online groceries received only $67 million of investment in 2016, a sharp contrast and decline from $504 million in 2015. The share of the food tech and online groceries space, however, remained above 50 per cent in the overall food and agricultural space. Packaged food segment has been lacklustre in 2016 with 9 deals worth $42 million, a 68 per cent fall from the previous year.

Mirroring the trend in the food tech space is the restaurant segment which recorded just 9 deals worth $27 million in the year so far. The share of agri farming and processing businesses attracted maximum investments in 2016 with spiked share in overall deal value from 17 per cent in 2015 to 32 per cent in 2016. The segment saw 6 deals amounting to $79 million, greater than 2013 and 2014 but down 58 per cent compared to $191 million last year.

"Dairy and Poultry has been the only segment to witness a growth of 120 per cent with investments amounting to $ 33 million in 2016 spread across 2 deals", the study added.

The biggest deal in the agri farming and processing space was a $40 million investment in Hyderabad-based Seedworks International Pvt. Ltd by private equity firm India Value Fund Advisors (IVFA). This was followed by International Finance Corp's (IFC) investment of $20 million in Kishore Biyani's Future Consumer Enterprises Ltd. Food category was topped by $30 million investment made by Peepul Capital Fund lll LLC and Ascent India Fund lll into Bengaluru based Maiyas Beverages and Foods.

"Packaged foods is a segment which will see investor interest in the future due to growth drivers like rising penetration of organized retail, changing urban lifestyle and increasing preference for convenient & hygienic food options. In the agro space, the ability to scale up along with infrastructural development of cold chains, warehousing, farm equipment etc. are factors that would determine investor attraction for the future", said Nita Kapoor, Chief Executive VCCircle.

She added, "After the irrational exuberance which we witnessed in 2015, the self-correction mode we are witnessing this year has come in as a boon. It gives entrepreneurs running businesses in the food, agri and consumer space to recalibrate their business models and desist from 'me too' ideas to realign themselves with the evaluation criteria of the investor community."